The Power of Differentiation

In highly competitive markets, differentiation is challenging. A relatively recent article in Journal of the Academy of Marketing Science* found that when buyers find it difficult to understand a provider’s differentiation, they will choose a more established option, delay the purchase or even worse - do nothing.

In many cases, buyers/prospects/clients may choose more than just one of the above actions. While the consequences are particularly severe for emerging businesses, a failure to differentiate also impacts established agencies. Regardless of size, it requires agencies to look closely at what frustrates prospects and clients alike.

Perhaps agencies should review and refine their approach to how they communicate and interact with the buying community. This offers an opportunity to look closely at their target customers’ needs and wants, their competition, and what sets themselves apart from the gazillions of agencies in existence.
After reading several journals, blogs, articles and books on the subject the four biggest opportunities for differentiation that seem to be repeated consistently are:

Tighten the focus through segmentation

While the agency's services may appeal to many markets, prospects tend to prefer more of a focused portfolio even though they do value industry exchange expertise. The needs of the target customers may vary by size of business, industry or other factors, and trying to appeal to everyone creates confusion and increases costs. Perhaps it might be best to focus on two or three sectors, as clients might question the ability of agencies to support everything. Prospects worry that agencies won’t understand the unique attributes of their business and industry. To combat this, it is worth considering narrowing who the main target customers are — and communicate that clearly.

Clarifying the competition

Differentiation is about being different, which means comparison is indispensable. It might be worth considering to focus on the primary competitive alternative — the most frequent option/approach the agency's target customers would choose to address the challenge if they don’t choose a particular agency. It is crucial to describe that alternative clearly. Then, the agency must share with that client what makes them different.

Looking beyond the service

While, in some cases, the agency's service may truly be unique, that uniqueness is often fleeting. Customers purchase services, but what they want are business outcomes and solutions to their needs. They recognize that the service alone is seldom the answer. The agency must then build a deeper understanding of their target customers, and find other things that matter to them. These elements could become the agency's differentiator.

Reducing the agency's claims

A big challenge for prospects is understanding the real source of value. Is your agency's solution the one that aligns most to their particular market, or does it deliver the highest creative performance as a whole? It is difficult for them to believe any particular agency can offer everything- the time of the "full-service agencies" are long gone. Positioning the agency's value provides a way to focus on what matters most. Once the agency has found that, making sure one communicates it consistently in everything is crucial. The agency may need to address other value elements, but making them supporting elements of the simpler message will help.

An article by Dr. Todd Dewett published on "The Creativity Research Journal" entitled "Understanding the Relationship between Information Technology and Creativity in Organisations"* states that when it comes to providers “The most effective path to improving differentiation is to make tough choices. Refine targets. Get more specific about competition. Clarify claims. Prove value. Each of these steps can help,” this translates directly to the creative agency model. Differentiation is an ongoing area of focus that requires constant monitoring and tuning. There is no magic recipe for differentiation. Instead, different messages and values will appeal to different prospects and clients. Focusing on the right segments, and right situations, to create differentiation that works seems to be the way forward.